BOC aims for yuan clearing dominance in Europe

The Frankfurt branch of Bank of China Ltd is hiring around 20 employees and increasing its equity by 1 billion yuan ($160 million) to become the first bank in the 18-nation euro area to clear payments in the Chinese currency.

"The globalization of the yuan is a great opportunity for Chinese banks," Li Guang, the head of Bank of China in Frankfurt, said in an interview. "Look at the success of American banks, which is also partly based on the international dominance of the dollar."

France leads eurozone in offshore RMB payments

RMB clearing bank in London within sight

The appointment of a clearing bank is the next step in Frankfurt's path to become an offshore yuan hub after the Bundesbank and the Chinese central bank agreed on March 28 to cooperate in the clearing and settlement of the Chinese currency in Germany's financial capital. Beijing-based Bank of China, the first Chinese bank to enter the German market when it set up a branch in Frankfurt in May 1989, has since been joined by four other major State-owned Chinese lenders as trade builds between the two countries.

"We are proactively preparing and striving to become the yuan-clearing bank in Frankfurt," said Li. Being granted approval to clear transactions "increases your influence and position in the market," he said. The final decision will be made by the People's Bank of China, the nation's central bank, he said.

Bank of China employs almost 200 people in Frankfurt. The new hires, which the bank expects to complete by the end of the year, will also serve to boost the bank's expansion in Germany in the longer term, he said.

Industrial and Commercial Bank of China Ltd, Bank of Communications Co, Agricultural Bank of China Ltd and China Construction Bank Corp also have branches in the city, which is home to Germany's two biggest lenders, Deutsche Bank AG and Commerzbank AG.